This Months Experts
RICHARD G. EDWARDS, CPCU
Assistant Vice President, Amica Mutual Insurance Co. (Lincoln, RI)
J. JOSHUA HARTLAGE
Vice President, Sales & Marketing, Fort Knox National Co. (FKNC, Louisville)
Product Marketing Director, Insurance, CheckFree i-Solutions (Atlanta)
NOAH ELKIN, PH.D.
Senior Analyst, eMarketer (New York).
Industry Solutions, Financial Services, edocs, Inc. (Natick, MA)
Q: What is happening with e-payments (including electronic bill payment and presentment/EBPP and electronic statement presentment/ ESP) in insurance?
A: Richard G. Edwards, Amica Mutual Insurance Co.: We are finding that more customers are using e-payments to pay their insurance premiums. The growth is slow and steady. More insurance companies are definitely interested in offering this type of service to all of their policyholders.
A: Joshua Hartlage, Fort Knox National Co.:There is still no driving force pushing customers to have their bills presented online and no significant consumer demand for corporations to make the economic investment. However, that doesn't mean that customers are not interested in electronic bill payment. I believe the simple payment solutions that allow customers to continue to receive their paper statements and have no "sign up" obligations will continue to flourish. I see a lot of pent-up demand amongst consumers for simple e-payment solutions.
A: Larry Hogan, CheckFree i-Solutions: Interest in e-billing and e-statements continues to grow rapidly within the insurance industry. Insurance companies have a higher percentage of direct debit payments than any other industry. Research has shown that more than 15 percent of auto premiums are paid using direct debits from checking accounts. Because insurance customers have already adopted electronic payments, they will easily graduate to viewing bills and statements and scheduling similar electronic payments online.
A: Noah Elkin, eMarketer: The insurance industry is the fourth largest biller in the US in terms of total bill volume. According to the Center for Advanced Purchasing Studies (CAPS), insurers use electronic processing for invoices, purchase orders, requisitions and payments. Other studies show insurance companies to be among the leaders on an industry basis in terms of putting e-payment programs in place.
A: Mark Delfeld, edocs: We see steady growth in certain segments and spectacular growth in others, such as the healthcare insurance space. For example, the healthcare ecosystem is rife with inefficiencies with regard to how the parties reimburse each other. There is also a tremendous amount of room for improvement in the supply chain as it relates to how insurance providers, patients, and hospital networks and doctors interact with each other.
Q: Do you expect to see increased deployment of EBPP, ESP and e-payments in insurance? Why? What factors will drive this trend?
A: Edwards, Amica: Generally, the acceptance of e-payments and e-presentment by the consumer continues to grow. This will influence a company's need to meet the demands of its customers and maintain its competitive edge. Although more companies may be interested in offering this service to their customers, they may be constrained by available resources within their organizations. Individual companies will have to decide where their resources will best be deployed in keeping with their commitment to their customers.
A: Hartlage, Fort Knox: First, a clarification needs to be made: Bill payment and bill presentment are two completely separate functions. I believe there are more insurance companies looking for a bill payment solution rather than presentment applications. We have a mail system that works and the majority enjoy having the paper documents in handit's simply a control factor for most. With that said, I believe that the insurance industry realizes this and we will see an increase in electronic bill payment solutions.
A: Hogan, CheckFree: E-billing is moving into the next tier of property & casualty insurance companies, which serve two million to eight million customers. Early adopters have proven that EBPP and ESP are valuable components of the customer self-care experience that can be quickly implemented at a relatively low cost.
A: Elkin, eMarketer: As more consumers become regular Internet users and more enterprises use the Internet to communicate with trading partners, the efficiencies and cost savings that insurance companies can derive from EBPP will increase. With corporate clients, much of the savings will derive from the automation of dispute resolution, which can shorten billing cycles and save companies money. Gartner (Stamford, CT) estimates that insurance companies can reduce their billing costs by 28 percent by using electronic invoicing.
A: Delfeld, edocs: Many insurance companies tell us they have active online account management projects that are at the top of the IT priority list. The value of online account management is demonstrated by solid ROI metrics. Additionally, there is now an eagerness to bypass the postal system to take advantage of the efficiencies inherent in online billing. Lastly, the use of e-account communications as the CRM platform is another factor supporting its growing popularity.
Q: What are the key areas and processes where e-payments have the most potential in insurance?
A: Elkin, eMarketer: To date, consumers have largely balked at adopting e-payments, even where they are available. However, the potential for savings does exist in health insurance claims, particularly given the number of checks that need to be cut, and in property and casualty for auto insurance claims. Overall, given the volume, the real payoff lies with corporate customers, perhaps with areas like workers' comp.
A: Hartlage, Fort Knox: I don't see a specific area or line of business that would use e-payments more than another. I believe the simplicity of an intuitive electronic bill payment solution will lure all types of customers. The only distinction I would make is if the bill payment solution works on next-day settlement-meaning the money is debited that day and there the next. Customers who are or about to be late will flock to the service.
A: Hogan, CheckFree: Of course the property and casualty market represents the largest portion of the insurance bills. However, CheckFree has found that all insurance lines can derive a tremendous value in presenting account and policy statements via the Internet. The value is enhanced when e-statements and e-bills, which go hand-in-hand, are available online. These are both important elements of the "e-relationship" between the customer, the agent and the insurance company.
Q: What are the obstacles to greater use and acceptance of e-payments in Insurance? The success factors?
A: Edwards, Amica: Consumer comfort level is an issue in the acceptance of e-payments. A large number of consumers still do not feel comfortable making payments over the Internet. Security and privacy play a hand in this, as well. Companies are doing a good job at improving the security of transactions over the Internet and it is important to get that message out to the consumer.
A: Hartlage, Fort Knox: Simplicity and no sign-up obligations will bring more e-payments users. Many companies offer account look-up sections on their existing home sites, making this a great place to simply make a payment, as well as allowing customers to become familiar with the concept of electronic payments without being obligated to use it.
A: Hogan, CheckFree: The key success factors are continued implementation of agent and customer self-care solutions and promoting awareness of the new Web capabilities to insurers' agent and customer base through bill and statement inserts, advertising and other incentive marketing programs.
A: Elkin, eMarketer: Obstacles include lack of payer readiness to use e-billing, implementation cost and complexity issues, pre-existing investments in automated systems for processing of paper-based payments, unwillingness of bill recipients (consumer and enterprise) to change existing payment habits, and privacy and security concerns. Benefits include improved customer service and retention and remaining competitive. Success factors involve raising client awareness of convenience and control factors associated with EBPP through e-mail and online marketing and offering secure payment, receipt and processing methods, including transaction receipts.
A: Delfeld, edocs: The availability of easy-to-use functionality for customers will help drive acceptance of e-payments in the insurance market. And, they need sophisticated functionality, such as dynamic online account management, anytime, anywhere presentment and payment, along with analytics, charting, personalization, and the ability to use the e-account touch point, as the springboard to interact with the insurer online about all matters.
Q: What can the insurance industry learn from the banking industry in the area of e-payments?
A: Hartlage, Fort Knox: I think the banking industry has a completely different model than the insurance industry. Banks are interested in paying all of their customers' bills (groceries, loans, lawn service, etc.), while the insurance industry just wants to be paid. On the contrary, I believe banks can learn from the insurance companies. The insurance industry's willingness to apply fees to receiving electronic payments (recurring or online) is a terrific source of income of which banks are typically unable to take advantage.
A: Hogan, CheckFree: The credit card sector is very advanced with its e-billing and e-statement capabilities. Mortgage companies are also doing some innovative things around customer self-care. Consumers are going to these sites in large numbers to receive and analyze their account information. This creates a "stickiness" that enhances customer retention.
A: Elkin, eMarketer: The banking industry is a potentially strong ally of insurance firms where electronic payments are concerned, particularly given the central role banks play in the settlement process. In addition to e-payment software and solutions specialists, many large banking corporations are looking to target insurance companies with their own electronic payment services. Consequently, insurers should carefully assess the competitive landscape in the payments arena and decide on a best-of-breed provider in order to maximize efficiency gains and cost savings across the industry.
A: Delfeld, edocs: As Internet bankers' platforms are hitting the wall on adoption, they have come to realize that they cannot force a new medium on their mainstream customers. While the limited customer segment of "techies" will quickly adopt and learn a new interface, mainstream customers won't. They want a point-in-time view of account data that approximates the paper interface. Once they feel comfortable, they can then utilize online functionality through links embedded in the online account communication.
Peggy Bresnick Kendler has been a writer for 30 years. She has worked as an editor, publicist and school district technology coordinator. During the past decade, Bresnick Kendler has worked for UBM TechWeb on special financialservices technology-centered ... View Full Bio